Flutter Scraps €112.7m Cash Dividend but Stars Merger Still On

  • Company wants to reduce debt burden to mitigate COVID-19 impact ahead of The Stars merger
  • Shareholders to get additional shares instead of cash, no dividend payment in 2020 before deal
  • Flutter CEO Peter Jackson said merger is still going ahead, shareholders to vote in April
Businessman pulls up circle progress bar with the word DIVIDEND
Flutter Entertainment has suspended its cash dividend due to the ongoing pandemic, but its The Stars Group merger will go ahead. [Image: Shutterstock.com]

COVID-19 outbreak forces decision

Sportsbook holding company Flutter Entertainment plc has scrapped its final cash dividend payout of €112.7m ($124.2m) as it looks to mitigate the impact of the coronavirus outbreak on its business. 

sports betting revenues wiped out due to widespread cancellations of sports events

The owner of Paddy Power, Betfair, and FanDuel wants to conserve funds as it sees its sports betting revenues wiped out due to widespread cancellations of sports events.

With a planned merger with The Stars Group Inc. on the horizon, the company wants to keep its financials in good order. A profit warning issued by Flutter last week also projects a higher debt burden than it previously envisaged. 

Shareholders to receive additional shares

Flutter announced that while it will scrap the 2019 final dividend payout, shareholders will be given additional shares instead of cash payment. There will also be no dividend payment for Flutter shareholders in 2020 before the merger has been completed. 

no dividend payment for Flutter shareholders in 2020 before the merger

Other gambling firms, such as Playtech and William Hill, have also suspended dividend payments amid the ongoing crisis.

Conversations are in process with lenders to refinance existing debt from the two companies when the merger takes place. A £1.3bn ($1.6bn) debt arrangement deal was agreed in early March. Flutter plans to conduct further refinancing on any other debt that remains in the future.

Debt burden revisions

The merged company was planning on having a debt burden that was x3.5 earnings, not including synergies. However, Flutter now projects that this will probably be a higher figure.

The sportsbook holding company expressed its view in a prospectus and circular it published to give investors an update on the deal’s progress. It said it is still planning to lower its leverage to one or two times earnings over the medium term. 

Merger going ahead

Despite the ongoing uncertainty due to the coronavirus pandemic, Flutter CEO Peter Jackson is “more convinced than ever” that the merger will be going ahead.

He said the additional diversification and synergies that will result from the joining of forces with The Stars Group will be optimal. The Canadian gaming and online gambling company has the biggest online poker platform in the world, which is believed will help mitigate the impact on sports betting revenues. 

Hope for the future

The disruptions from the ongoing pandemic are expected to negatively affect the combined group’s financial profile for the current fiscal year. However, long-term damage is not expected.

The next step as part of the planned merger is for the shareholders of both companies to vote on the details of the agreement. Flutter shareholders will decide on the issue on April 21, 2020 in a meeting being held in Dublin, Ireland. According to an announcement made by The Stars Group on Friday, a special meeting on April 24 in Toronto, Canada will see its shareholders vote on the merger. Participants will also be able to place votes online.

If the deal goes ahead, it will create the world’s biggest online gambling group, worth more than £10bn ($12.23bn). Flutter shareholders will have a stake of about 54.64% in the new company, which will set up its listed on the London Stock Exchange. No official name for the combined group has been announced to date.